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All investing is fundamentally a prediction about the future. Getting comfortable with a level of risk, doesn't change the fact that all predictions about the

All investing is fundamentally a prediction about the future. Getting comfortable with a level of risk, doesn't change the fact that all predictions about the future are definitionally speculative. "Investing" vs "speculating" is a matter of degree, not kind.

sime2009 4y ago
Traditional investments have ways of generating and returning money without selling the asset itself. For example, stocks in companies can pay dividends, real estate can return money by renting out properties. They are positive sum games and the risk of loosing money is much lower. Speculating, like gambling is a zero sum game (at best). Any gains come directly from other players. They are inherently risky. There is a qualitative difference here.
- lordnacho 4y ago
  No, GP is right. "Speculating" is merely a loaded term for investment that the writer does not approve of. There's any number of plausible reasons why one person's investment is another's speculation: - Is technical analysis investing or speculating? - How much do you need to know to call it an investment? Do you just need to have heard of FTX, or do you need to have gone to visit for due diligence? - How do you know it's zero sum? A business model may appear later that makes it positive sum. EOTD we're talking about decisions under uncertainty. That's literally all decisions. > Traditional investments have ways of generating and returning money without selling the asset itself. For example, stocks in companies can pay dividends, real estate can return money by renting out properties. They are positive sum games and the risk of loosing money is much lower. This part is particularly suspect. Let's say I make a crypto exchange and sell shares in the company. Let's say it pays dividends. Is buying my shares speculating or investing? Look at real estate, your other example. There's a massive real estate collapse going on right now, with enough empty units to fit all of Germany in it. Is that speculating or investing?
  - twawaaay 4y ago
    I would just like to point out this piece of financial knowledge: Dividends are actually the same as selling a piece of your investment. The moment dividends are paid the share price falls by exactly the amount of dividend paid. One way to think is that the second before the dividends are paid everybody included the dividend in the valuation of the share price. They expect the dividend to be paid to them. One second after the dividend was paid they no longer include it in the valuation making the share price worth less to them exactly by the amount of dividend paid. If you had a piggy bank with $100 bill in it and a cookie that is promised to you if you hold the piggy bank with the bill in it at certain time, the piggy bank is worth $100 and a cookie. But once the deadline passes you can no longer get the cookie and the piggy bank converts to being just a regular piggy bank with $100 bill and no cookie promised. Another way to think is that the company just gave off 1% of their value to shareholders in form of cash making the company 1% poorer. So if you had a share price of $100 and you expected $1 dividend, the second after the dividend is paid you are left with a share worth $99 and $1 in cash which is exactly what would happen if you just sold 1% of your shares. And because nobody is surprised by the dividend, the fact of paying it has already been included in the valuation well in advance of payment. There is no reason for the valuation to change due to payment of the dividend (other than the company losing exactly the value they paid in dividend). So, to summarise: >> Traditional investments have ways of generating and returning money without selling the asset itself This is false, as shown by my above explanation. Dividends are not generating anything and are actually the same as selling portion of your asset.
    - adammarples 4y ago
      This is somewhat gigantically missing the point. Traditional investments have some kind of income stream based on actually creating value. When a company makes money to disburse me as dividends, they have actually created value and been able to generate some money in exchange. Therefore they can distribute the income without the company itself being cannabilised and sold to a greater fool. You could squint at it and consider that they are selling 1% of the company each time, but ignore the fact that they're also growing the company by 1% each time by creating real world value in their activities.
    - 4y ago
quickthrower2 4y ago
As is having any kind of asset, even cash. Cash being a really bad speculation in general (although good on occasions for short periods).

sime2009 4y ago

Traditional investments have ways of generating and returning money without selling the asset itself. For example, stocks in companies can pay dividends, real estate can return money by renting out properties. They are positive sum games and the risk of loosing money is much lower. Speculating, like gambling is a zero sum game (at best). Any gains come directly from other players. They are inherently risky. There is a qualitative difference here.

lordnacho 4y ago
No, GP is right. "Speculating" is merely a loaded term for investment that the writer does not approve of. There's any number of plausible reasons why one person's investment is another's speculation: - Is technical analysis investing or speculating? - How much do you need to know to call it an investment? Do you just need to have heard of FTX, or do you need to have gone to visit for due diligence? - How do you know it's zero sum? A business model may appear later that makes it positive sum. EOTD we're talking about decisions under uncertainty. That's literally all decisions. > Traditional investments have ways of generating and returning money without selling the asset itself. For example, stocks in companies can pay dividends, real estate can return money by renting out properties. They are positive sum games and the risk of loosing money is much lower. This part is particularly suspect. Let's say I make a crypto exchange and sell shares in the company. Let's say it pays dividends. Is buying my shares speculating or investing? Look at real estate, your other example. There's a massive real estate collapse going on right now, with enough empty units to fit all of Germany in it. Is that speculating or investing?
- twawaaay 4y ago
  I would just like to point out this piece of financial knowledge: Dividends are actually the same as selling a piece of your investment. The moment dividends are paid the share price falls by exactly the amount of dividend paid. One way to think is that the second before the dividends are paid everybody included the dividend in the valuation of the share price. They expect the dividend to be paid to them. One second after the dividend was paid they no longer include it in the valuation making the share price worth less to them exactly by the amount of dividend paid. If you had a piggy bank with $100 bill in it and a cookie that is promised to you if you hold the piggy bank with the bill in it at certain time, the piggy bank is worth $100 and a cookie. But once the deadline passes you can no longer get the cookie and the piggy bank converts to being just a regular piggy bank with $100 bill and no cookie promised. Another way to think is that the company just gave off 1% of their value to shareholders in form of cash making the company 1% poorer. So if you had a share price of $100 and you expected $1 dividend, the second after the dividend is paid you are left with a share worth $99 and $1 in cash which is exactly what would happen if you just sold 1% of your shares. And because nobody is surprised by the dividend, the fact of paying it has already been included in the valuation well in advance of payment. There is no reason for the valuation to change due to payment of the dividend (other than the company losing exactly the value they paid in dividend). So, to summarise: >> Traditional investments have ways of generating and returning money without selling the asset itself This is false, as shown by my above explanation. Dividends are not generating anything and are actually the same as selling portion of your asset.
  - adammarples 4y ago
    This is somewhat gigantically missing the point. Traditional investments have some kind of income stream based on actually creating value. When a company makes money to disburse me as dividends, they have actually created value and been able to generate some money in exchange. Therefore they can distribute the income without the company itself being cannabilised and sold to a greater fool. You could squint at it and consider that they are selling 1% of the company each time, but ignore the fact that they're also growing the company by 1% each time by creating real world value in their activities.
  - 4y ago

quickthrower2 4y ago

As is having any kind of asset, even cash. Cash being a really bad speculation in general (although good on occasions for short periods).